T THE height of what is probably the greatest ‘boom’

that the United States has ever experienced, the fear of an approaching new economic crisis is rapidly grow- ing in the capitalist world. This fear is well grounded.

The _ history of capitalism shows that every boom ends in a crisis, and that such crises have in the past regularly re- curred every seven to ten years. In conditions of the recent gen- eral crisis of the capitalist sys- tem, however, the course of the cyclio process of capitalist pro- duction has been altered, in the sense that (a) the phases of crisis and depression have be- come more prelonged, and (b) while the depression is followed by a revival, it is by no means followed by a phase of general prosperity.

The present cycle, under the influence of the world war, is not a normal one. In the USS. it has led to a boom. But, in the majority of other countries, pro- duction still lags considerably behind pre-war years and is on a low, crisis level. The abnorm- ality of the postwar cycle es- sentially consists in the follow- ing: Q

The preceding cycle was _ in- terrupted by the world war. War interrupts the normal cyclic movement of production by cre- ating a demand for goods that considerably surpasses the vol- ume of production. In wartime it is not the capitalist who seeks a buyer, but on the contrary, the buyers compete with each other for the insufficient quan- tities of goods available.

Another feature of war econ- omy is the special character of the use of materials required * for the conduct of war. All commodities may be divided in- to two basic categories; means of production, which serve the

further manufacture of com- modities; and means of con- sumption, which, apart from

luxury goods for the rich, serve the reproduction of the labor

by

EUGENE VARGA

noted Soviet economist

.

power of the workers. In normal times, when both means of pro- duction and means of consump- tion have been fully used up, they are returned into the pro- cess of circulation of social capital, the means of produc- tion as constant capital (build- ings, equipment, and so on), and the means of consumption as variable capital (capital used for payment of wages).

In war production this is not so. War materials are com- pletely consumed by war; they are not returned into the gen- eral circulation of social capi- tal either as constant or as variable capital. This means

PACIFIC TRIBUNE — PAGE 10

that the modern economy of capitalist countries tends toward the absolute impoverishment of the country. And this , tendency is further strengthened by the

‘destruction wrought by enemy

action.

Indeed, all capitalist countries. which fought in the war, with the exception of the U.S. and Canada, emerged from the war greatly impoverished. But in contrast to the European coun-

tries, the U.S. emerged even richer than before. Her indus- trial production for 1946 is 50

percent higher than 1938—on a boom level.

e EFORE the war the U.S., the richest capitalist country,

could utilize only part of her available productive forces, since there was no market for a larger volume of commodities. Only the world war, with its un- limited demand for commodi- ties, made possible the utiliza- tion of these productive forces which never found a use in peace-time. During the war

yr

American production more than doubled, and as a result Amer- ica could cover the _ require- ments not only of the armed forces but also of the civilian

population, with the exception of houses, automobiles. and, temporarily, certain not vitally

essential provisions.

anni a The U.S. succeeded also in ac-

cumulating considerable wealth in the form of newly constructed factories and ships.

Of great importance, too, in this connection, is the fact ‘that the U.S. entered the war late, and that American territory did not suffer at all from military operations. :

These differences in the effects of the war on the U.S., and likewise Canada, on the one hand, and on the capitalist coun-

tries of Europe and the Far East on the other hand, mean that today, just as after the First World War, capitalism is

not experiencing a uniform eco-_

nomic cycle. In the U.S. there is a boom, while elsewhere there is a gradual deterioration to a low, crisis level. ;

But the American boom is not normal, either. To a con- siderable measure it is a spe- cial product of the preceding

-period of war economy. Despite

the doubling of industrial pro- duction, the population of the U.S. could not. completely spend their money: incomes on com- modities, since a considerable part of the production went for war materials. AS a_ result, enormous sums have accumu- lated in the hands of the popu- lation in the form of banknotes, savings accounts and bank de- posits.

The present boom is, then, something abnormal, a sudden release of sums of money that has no precedent in its scale.

@

ND _ yet, despite the boom,

there are 2,500,000 unemploy- ed in the U.S. There are 1,500,- 000 demobilized servicemen still living on their. gratuities. The volume of industrial production in 1946 has shrunk by more than one-third in that of 1943. Real wages are falling as a result of the rapid

'

SServes . of

comparison with ©

|

rise of prices (between July and September the cost-of-living in- dex jumped by 10 percent.) and also as a result of the abolition of overtime and Sunday work. 4 —Commodity reserves have be- “gun to increase. According to data of the department of commerce, the commodity re- factories and of gross and retail trade rose in August by one milliard dollars: their total value is now 31 mil- liards. (A milliard is one thous- and million.) The department states that this represents a definite danger for further eco- nomic development. 2 Stock exchange prices for raw materials subject to delivery declined considerably in October. 3 Since May 1946 there has been a sharp fall in the prices of industrial shares. In the period from the middle of

' May to the middle of September,

the total value of shares regis- tered at the New York stock exchange fell from 84 to 65 mil- liard dollars. Experience shows that such a fall in stock ex- change prices takes place about a year and a half before the outbreak of a crisis. ;

All this shows that in the near future—probably not later than 1948, but possibly earlier— — the beginning of the new eco- nomic crisis in the United States may be expected,

FRIDAY, JANUARY 10, 1947

*